You can learn a lot about someone by taking a look at his stock portfolio. But can the same be said of a country -- that is, if you knew which stocks were held by the largest number of investors? Would we find that we hold companies whose businesses we're likely to understand? That are our stocks are performing well? Or merely that these stocks are overvalued -- by very nature of their being so widely held?

Let's take a look. By the 20 most popular stocks, I mean those that are held in the largest number of individual brokerage accounts, mutual funds, pensions, trusts, etc. They're like a can of soup: Most everybody has at least one somewhere in their cupboard, whether they know it or not (hopefully, they know it).

Without further ado, the 20 stocks held by the largest number of American investors (in alphabetical order):

    AOL Time Warner  (NYSE:AOL)AT&T  (NYSE:T)AT&T Wireless  (NYSE:AWE)Agere Systems  (NYSE:AGRB)Avaya  (NYSE:AV)Cisco Systems  (NASDAQ:CSCO)Citigroup  (NYSE:C)Comcast  (NASDAQ:CMCSA)ExxonMobil  (NYSE:XOM)General Electric  (NYSE:GE)Home Depot  (NYSE:HD)Intel  (NASDAQ:INTC)IBM  (NYSE:IBM)Johnson & Johnson  (NYSE:JNJ)Lucent Technologies  (NYSE:LU)Merck  (NYSE:MRK)Microsoft  (NASDAQ:MSFT)Pfizer  (NYSE:PFE)Verizon Communications  (NYSE:VZ)Wal-Mart  (NYSE:WMT)

Notice that of the 20, only four are not in the Dow Jones Industrial Average 30 (or were not spun off from a Dow stock): Cisco, Comcast, Pfizer, and Verizon. Notice, too, that a whopping six are on the list (30%) thanks to AT&T, including Agere, Avaya, Lucent, Comcast (which bought AT&T Broadband), and Verizon.

Incidentally, only four of our nation's most popular stocks make the coveted list of the world's 10 best global brands, those being General Electric, IBM, Intel, and Microsoft.

In honor of The Motley Fool's 10th anniversary, let's take a closer look at the first 10 right now. We'll scour the next 10 on Thursday. Returning to our two key questions: Is the country investing well, and does it understand what it owns?

      Performance of 10 Top Holdings
    YTD    5-Year Total**AOL Time Warner   +16%        +11%AT&T              -20%        -65%AT&T Wireless     +37%        -75%*      Agere Systems     +66%        -45%^Avaya            +280%        -54%~    Cisco Systems     +34%         +7%    Citigroup         +26%        +38%Comcast           +24%        +26%    ExxonMobil         +5%        +10%General Electric  +15%       -3.4%Average           +48%        -15%S&P 500 Index     +11%         -9%      *Since debut 4/27/00
^Since debut 5/14/02
~Since debut 9/18/00
**Dividends not included

Year to date, U.S. investors should be happy. Ten of the most widely held are up an average of 48% since January (excluding dividends), comparing well to the S&P 500's 11% gain and Nasdaq's 23% jump. Over the last five years, however, these top 10 have fared worse than the S&P 500 by a substantial six percentage points (that's 40% worse on a percentage basis).

This performance shouldn't be too surprising given that a majority of managed mutual funds -- the largest owners -- underperform the S&P 500 every year (and charge you for the privilege). In the last five years, most would have been better off invested in the S&P 500 index.

Worst of the worst
Before we consider valuations, the worst performers among the group are worth a closer look. And they're all associated with AT&T. There's AT&T itself, down 65% the last five years; AT&T Wireless, down 75% since its 2000 debut; and there's Agere and Avaya, both spun-off from Lucent, which was itself spun off from AT&T. Both are down about 50% since.

AT&T has been among the most widely held stocks in the country for decades, in some cases passed down from generation to generation. (Even my grandparents, who were in their 20s during the Great Depression and, unfortunately, avoided stocks the rest of their lives, somehow owned shares of AT&T.) Now, if you read the Fool, you know we espouse buying and holding. But that only applies to good stocks -- ones that represent great companies and trade at good prices.

AT&T, in my opinion, is anything but. My sense is that tens of thousands of households are hoarding the stock -- and worse yet, its spun-off stepsisters -- for little better reason than that they always have. Even if you could make an argument for holding AT&T through thick and thin (which isn't easy), there's little to support owning its complicated (and ejected) integrated circuit and telecom equipment spin-offs, Agere and Avaya (much less Lucent).

Odds are extremely low that many of these shareholders have a decent understanding of what they've come to own. If more investors had an understanding, they might have sold each stock when it was spun off, which was also when each commanded its highest price. Take my advice, if you get stock in a spin-off, you should either commit to learning the business or simply sell it. Will investors eventually come to action here and sell?

The story of NCR (NYSE:NCR) may hold a clue. Spun off from AT&T in 1996, NCR remained one of the most widely held stocks in the country until a few years ago. Investors finally started to sell and it dropped from the list -- a fate that may await the likes of Avaya, Agere, and Lucent. By the way, NCR remains below its spin-off price, too.

The prices we pay
Large companies typically offer lower-than-average risk, but they also afford lower average returns. The giants are well-known, so -- unlike with smaller, undiscovered companies -- valuation inefficiencies are squeezed out of them and remains so until a surprise emerges.

That's a price you pay for greater security: It's difficult to beat the market averages by owning only the largest, most popular stocks, because they're usually among the most expensive. In many cases, you will be better off (yet again) owning a broad-market index fund.

For our top 10, consider recent valuations to free cash flow, as well as cash and long-term debt, and see if there are any outliers.

    P/FCF     Cash      LT DebtAOL-TW           24       $2.0B     $25.8BAT&T             24        5.2B      13.5BAT&T Wireless   N/A        4.6B      11.1BAgere Systems   N/A        727M       481MAvaya            17        724M       886MCisco Systems    25        8.4B        0.0Citigroup       N/A       17.0B        N/AComcast         133        3.4B      29.9BExxonMobil       18       12.3B       6.4BGeneral Elec.    17        6.5B        N/AS&P 500 Index    23         N/A        N/A -FCF based on trailing 12 months, most to June 30.
-FCF numbers do not exclude tax benefits from stock options.
-Cash & equiv. and debt are most recent results, most June 30.
-Citigroup and GE are financial corps., so some results are N/A.
-Comcast is valued -- rightly or wrongly -- on EBITDA more than FCF.

Judging by results, America is less averse to holding stocks with large amounts of debt than suits me. After all, so many own AOL Time Warner, Comcast, AT&T, and AT&T's gift to shareholders -- AT&T Wireless with $11 billion in debt and a few billion in negative free cash flow annually. (Really, AT&T, you're too generous.)

AT&T's Agere Systems burns cash, too. Indeed, of AT&T (and Lucent's) offspring listed here, only Avaya generates positive free cash flow (it just started recently). From the list, Avaya might be the most likely (or only likely) to be undervalued -- and that's on the assumption that free cash flow continues its new trajectory.

Overall, you can see that the companies with higher debt and lower free cash flow are generally among the worst five-year performers. Most surprising to me is that so many investors -- funds and individuals alike -- have clung to the AT&T and Lucent spin-offs despite their dismal performance these past years. Many investors were given very few shares of the spin-offs, but that's not a good reason to keep them.

So, are we lazy? Uninformed? On autopilot? From this look at the first 10 of our most widely held stocks, it might appear so.

But it's not over yet. On Thursday, we'll see if the other top 10 fare any better.

Get your portfolio in shape -- start by finding a better broker. Of the 20 most widely held companies, Jeff owns shares in J&J and Intel. Of the Fool's 10 ways to make more money now, you should undertake 10. Or at least 9.